Hong Kong signed a comprehensive double taxation agreement with Laos on Oct. 29 that will cut the Southeast Asian country's withholding tax on interest paid to Hong Kong residents to 5% from 10%, and on dividends to as little as 5%, the Hong Kong government said. It is the city's 61st such treaty and the sixth signed this year.

For Hong Kong residents who lend to, invest in or hold shares of Lao businesses, the deal lowers the tax taken at source before money comes home. It also lets Hong Kong residents count tax paid in Laos as a credit against Hong Kong tax on the same income, subject to the Inland Revenue Ordinance. The new rates do not apply yet: the treaty takes effect only after both governments finish ratification.

Acting Secretary for Financial Services and the Treasury Joseph Chan signed for Hong Kong and Deputy Minister of Finance Soulivath Souvannachoumkham signed for Laos. Financial Secretary Paul Chan and Laos' Deputy Prime Minister and Minister of Finance Santiphab Phomvihane witnessed the signing in Hong Kong, according to the government statement.

What changes for Hong Kong investors in Laos

The Inland Revenue Department's table of treaty rates, updated for the Laos pact, shows the maximum Laos may charge a Hong Kong resident once the agreement is in force:

• Dividends: 5% for qualifying companies, 8% for other recipients.
• Interest: 5%.
• Royalties: 5%.

Laos currently withholds 10% on both dividends and interest paid to Hong Kong residents, the government said. The Vientiane Times reported that the 5% dividend rate is reserved for Hong Kong companies that directly hold at least 15% of the paying company's capital over a specified 365-day period. Individual shareholders and smaller corporate holders would fall under the 8% rate.

The IRD lists the Laos agreement as "pending" in its effective-date column. In Hong Kong, the Chief Executive in Council will make an order under the Inland Revenue Ordinance, which then goes to the Legislative Council for negative vetting. Past treaties show the gap can be long. Armenia's agreement, signed in June 2024, entered into force in April 2025 and applies from the 2026/27 year of assessment, according to the IRD's list of concluded agreements.

Hong Kong's ASEAN tax treaty network

The pact gives Hong Kong comprehensive tax treaties with seven ASEAN member states, which the government said cover more than 70% of the bloc's population and gross domestic product. The others on the IRD list are Brunei, Cambodia, Indonesia, Malaysia, Thailand and Vietnam.

Rates vary widely across that group. Under Hong Kong's treaty with Indonesia, Jakarta can charge Hong Kong residents up to 10% on interest and 5% or 10% on dividends, the IRD table shows. Thailand's maximum on dividends is 10%. The Laos terms sit at the low end of the regional range for interest.

The signing continues a busy year for Hong Kong's treaty office. The IRD's records show agreements signed with Barbados in March and Cyprus in June, both still awaiting entry into force. The 61st agreement is the 16th signed by the current-term government, the statement said.

Paul Chan described the treaty as a way to deepen economic and trade ties and to extend Hong Kong's role as a "super connector" between mainland China and global markets. At their meeting, the two officials also discussed capital markets, green finance, wealth management and Hong Kong's plan to build a global gold trading, clearing and reserve hub, according to the statement.

Wider Laos ties

The tax deal follows other links between the two economies this year. In July, Laos' Ministry of Finance and Hong Kong's Financial Services and the Treasury Bureau signed a memorandum of understanding on gold market development, the Vientiane Times reported. A Laos-Hong Kong business forum held in the city on Sept. 11 drew more than 120 business representatives, the paper said.

Laos has double taxation agreements with 15 countries, including China, Singapore, Vietnam, Thailand and South Korea, according to the Lao Ministry of Finance as cited by the Vientiane Times.

For most Hong Kong households, Laos is a small part of any portfolio. The withholding question investors in the city face more often concerns U.S. dividends, where fund domicile can change what investors keep.

The next step is the Chief Executive in Council's order under the Inland Revenue Ordinance. Once it is tabled at the Legislative Council and both sides complete ratification, the IRD will replace "pending" with the year of assessment from which the lower Laos rates apply.

This article is general information, not financial advice.